Correlation Between Lonkey Industrial and Huizhou Desay

Can any of the company-specific risk be diversified away by investing in both Lonkey Industrial and Huizhou Desay at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Lonkey Industrial and Huizhou Desay into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Lonkey Industrial Co and Huizhou Desay SV, you can compare the effects of market volatilities on Lonkey Industrial and Huizhou Desay and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Lonkey Industrial with a short position of Huizhou Desay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lonkey Industrial and Huizhou Desay.

Diversification Opportunities for Lonkey Industrial and Huizhou Desay

0.56

Correlation Coefficient

Lonkey Industrial  Huizhou Desay

Very weak diversification

The 3 months correlation between Lonkey and Huizhou is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Lonkey Industrial Co and Huizhou Desay SV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huizhou Desay SV and Lonkey Industrial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Lonkey Industrial Co are associated (or correlated) with Huizhou Desay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huizhou Desay SV has no effect on the direction of Lonkey Industrial i.e., Lonkey Industrial and Huizhou Desay go up and down completely randomly.

Pair Corralation between Lonkey Industrial and Huizhou Desay

Assuming the 90 days trading horizon Lonkey Industrial Co is expected to under-perform the Huizhou Desay. But the stock apears to be less risky and, when comparing its historical volatility, Lonkey Industrial Co is 1.13 times less risky than Huizhou Desay. The stock trades about -0.25 of its potential returns per unit of risk. The Huizhou Desay SV is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  11,430  in Huizhou Desay SV on October 25, 2024 and sell it today you would lose (459.00) from holding Huizhou Desay SV or give up 4.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Lonkey Industrial Co  vs.  Huizhou Desay SV

Lonkey Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lonkey Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Lonkey Industrial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Huizhou Desay SV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huizhou Desay SV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Lonkey Industrial and Huizhou Desay

The main advantage of trading using opposite Lonkey Industrial and Huizhou Desay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lonkey Industrial position performs unexpectedly, Huizhou Desay can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Huizhou Desay will offset losses from the drop in Huizhou Desay's long position.

The idea behind Lonkey Industrial Co and Huizhou Desay SV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.